Revenue for the Intelligent Cloud division grew 5% to hit $6.3 billion, compared with $5.9 billion in the same quarter a year ago.
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Total revenue fell to $23.80 billion from $26.47 billion.
CEO Satya Nadella praised the success of the cloud stating, “Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas”. The company has been adding customers and workloads for its Azure services, which let clients run and store applications in Microsoft’s cloud-data centers. The two companies are proving to be fierce rivals in the arena of public cloud, where Microsoft is gaining momentum with its Azure product line, which saw a 140% year-over-year jump in revenue in constant currency.
Wall Street analysts had been predicting that Microsoft would report earnings of around 71c per share; in the event, the company reported 78c.
Microsoft generates more than half of its revenue from outside the United States.
Microsoft continued to see growth with is Surface products, as the segment is up 29% year-over-year.
Office 365 revenue growth was almost 70 percent in constant currency. That measure, which includes Azure plus other businesses like Office 365, is up 15% from the US$8.2bil (RM33.97bil) revenue it estimated last quarter.
Microsoft said that all its commercial cloud businesses were running at an annual revenue rate of $9.4 billion as of the second quarter, compared with $5.5 billion for the same period in 2014.
However there was more disappointing news for the Windows Phone, with revenue down 49% over the course of the year.
Profit excluding certain items in the fiscal second quarter, which ended December 31, was 78 cents a share, and sales adjusted for deferrals were $25.7 billion, Microsoft said in a statement after the US stock markets closed.
Ives called the progress on Windows 10, with 200 million downloads to date, “eye-popping”.
More than one-third of Fortune 500 companies have adopted Microsoft’s enterprise mobility solutions, the company reported, indicating the number has almost tripled year over year. Xbox Live monthly active users also were up 30 percent year-over-year to a record 48 million.
In a phone interview, Amy Hood, Microsoft’s chief financial officer, said Microsoft was not yet predicting a turnaround in the PC market.
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Microsoft generated $25.7 billion in revenue for Q2 2016, largely driven by its Azure and Office 365 cloud offerings.
